Fundamentals of Multinational Finance

Cover......Page 1
Title Page......Page 4
Copyright......Page 5
Preface......Page 6
Contents......Page 14
PART 1 Global Financial Environment......Page 20
 Chapter 1 Multinational Financial Management: Opportunities and Challenges......Page 21
  Financial Globalization and Risk......Page 22
  The Global Financial Marketplace......Page 23
  GLOBAL FINANCE IN PRACTICE The Trouble with LIBOR......Page 24
  The Theory of Comparative Advantage......Page 28
  What Is Different about International Financial Management?......Page 30
  Market Imperfections: A Rationale for the Existence of the Multinational Firm......Page 31
  The Globalization Process......Page 32
  MINI-CASE Bitcoin-Cryptocurrency or Commodity?......Page 36
  Problems......Page 39
  Internet Exercises......Page 40
  History of the International Monetary System......Page 42
  GLOBAL FINANCE IN PRACTICE Hammering Out an Agreement at Bretton Woods......Page 45
  IMF Classification of Currency Regimes......Page 47
  GLOBAL FINANCE IN PRACTICE Swiss National Bank Sets Minimum Exchange Rate for the Franc......Page 52
  Fixed versus Flexible Exchange Rates......Page 53
  GLOBAL FINANCE IN PRACTICE Who Is Choosing What in the Trinity/Trilemma?......Page 54
  A Single Currency for Europe: The Euro......Page 55
  GLOBAL FINANCE IN PRACTICE The Euro and the Greek/EU Debt Crisis......Page 56
  Emerging Markets and Regime Choices......Page 57
  Globalizing the Chinese Renminbi......Page 61
  Exchange Rate Regimes: What Lies Ahead?......Page 64
  MINI-CASE Russian Ruble Roulette......Page 65
  Questions......Page 67
  Problems......Page 68
  Internet Exercises......Page 69
 Chapter 3 The Balance of Payments......Page 70
  Fundamentals of BOP Accounting......Page 71
  The Accounts of the Balance of Payments......Page 73
  GLOBAL FINANCE IN PRACTICE The Global Current Account Surplus......Page 75
  GLOBAL FINANCE IN PRACTICE A Country's Net International Investment Position (NIIP)......Page 77
  BOP Impacts on Key Macroeconomic Rates......Page 81
  Trade Balances and Exchange Rates......Page 83
  Capital Mobility......Page 86
  MINI-CASE Global Remittances......Page 91
  Questions......Page 93
  Problems......Page 94
  Internet Exercises......Page 97
 Chapter 4 Financial Goals and Corporate Governance......Page 98
  Who Owns the Business?......Page 99
  The Goal of Management......Page 102
  Publicly Traded versus Privately Held: The Global Shift......Page 107
  Corporate Governance......Page 109
  GLOBAL FINANCE IN PRACTICE Italian Cross-Shareholding and the End of the Salatto Buono......Page 113
  GLOBAL FINANCE IN PRACTICE Is Good Governance Good Business Globally?......Page 116
  MINI-CASE Luxury Wars-LVMH vs. Hermès......Page 117
  Problems......Page 122
  Internet Exercises......Page 125
PART 2 Foreign Exchange Theory and Markets......Page 126
 Chapter 5 The Foreign Exchange Market......Page 127
  Structure of the Foreign Exchange Market......Page 128
  GLOBAL FINANCE IN PRACTICE FX Market Manipulation: Fixing the Fix......Page 131
  GLOBAL FINANCE IN PRACTICE My First Day of Foreign Exchange Trading......Page 132
  Transactions in the Foreign Exchange Market......Page 133
  Size of the Foreign Exchange Market......Page 135
  Foreign Exchange Rates and Quotations......Page 138
  GLOBAL FINANCE IN PRACTICE Russian Symbolism......Page 139
  MINI-CASE The Venezuelan Bolivar Black Market......Page 148
  Problems......Page 152
  Internet Exercises......Page 155
 Chapter 6 International Parity Conditions......Page 156
  Prices and Exchange Rates......Page 157
  GLOBAL FINANCE IN PRACTICE The Immiseration of the North Korean People-The "Revaluation" of the North Korean Won......Page 159
  Interest Rates and Exchange Rates......Page 164
  GLOBAL FINANCE IN PRACTICE Hungarian Mortgages......Page 171
  Forward Rate as an Unbiased Predictor of the Future Spot Rate......Page 172
  Prices, Interest Rates, and Exchange Rates in Equilibrium......Page 174
  Summary Points......Page 175
  MINI-CASE Mrs. Watanabe and the Japanese Yen Carry Trade......Page 176
  Problems......Page 178
  Internet Exercises......Page 182
  Purchasing Power Parity......Page 183
  Covered Interest Arbitrage (CIA) and Interest Rate Parity (IRP)......Page 184
  International Fisher Effect......Page 185
 Chapter 7 Foreign Currency Derivatives and Swaps......Page 187
  Foreign Currency Futures......Page 188
  Currency Options......Page 190
  Option Pricing and Valuation......Page 198
  Interest Rate Risk......Page 200
  GLOBAL FINANCE IN PRACTICE A Fixed-Rate or Floating-Rate World?......Page 201
  Interest Rate Derivatives......Page 202
  Summary Points......Page 206
  MINI-CASE McDonald's Corporation's British Pound Exposure......Page 207
  Questions......Page 208
  Problems......Page 209
  Internet Exercises......Page 213
 Chapter 8 Foreign Exchange Rate Determination......Page 214
  Exchange Rate Determination: The Theoretical Thread......Page 215
  Currency Market Intervention......Page 219
  GLOBAL FINANCE IN PRACTICE Rules of Thumb for Effective Intervention......Page 223
  Disequilibrium: Exchange Rates in Emerging Markets......Page 224
  GLOBAL FINANCE IN PRACTICE Was George Soros to Blame for the Asian Crisis?......Page 226
  Forecasting in Practice......Page 231
  GLOBAL FINANCE IN PRACTICE JPMorgan Chase Forecast of the Dollar/Euro......Page 233
  Summary Points......Page 235
  MINI-CASE The Japanese Yen Intervention of 2010......Page 236
  Problems......Page 238
  Internet Exercises......Page 241
PART 3 Foreign Exchange Exposure......Page 242
  Types of Foreign Exchange Exposure......Page 243
  Why Hedge?......Page 244
  Transaction Exposure Management: The Case of Trident......Page 249
  GLOBAL FINANCE IN PRACTICE Hedging and the German Automobile Industry......Page 257
  Summary Points......Page 258
  MINI-CASE Banbury Impex (India)......Page 259
  Problems......Page 263
  Internet Exercises......Page 268
  Overview of Translation......Page 269
  Translation Methods......Page 271
  Trident Corporation's Translation Exposure......Page 273
  GLOBAL FINANCE IN PRACTICE Foreign Subsidiary Valuation......Page 277
  Managing Translation Exposure......Page 278
  GLOBAL FINANCE IN PRACTICE When Business Dictates Hedging Results......Page 279
  MINI-CASE LaJolla Engineering Services......Page 280
  Questions......Page 283
  Problems......Page 284
  Internet Exercises......Page 285
  A Multinational's Operating Exposure......Page 286
  GLOBAL FINANCE IN PRACTICE Expecting the Devaluation-Ford and Venezuela......Page 290
  Measuring Operating Exposure: Trident Germany......Page 291
  Strategic Management of Operating Exposure......Page 296
  GLOBAL FINANCE IN PRACTICE Do Fixed Exchange Rates Increase Corporate Currency Risk in Emerging Markets?......Page 297
  Proactive Management of Operating Exposure......Page 298
  Summary Points......Page 303
  MINI-CASE Toyota's European Operating Exposure......Page 304
  Questions......Page 306
  Problems......Page 307
  Internet Exercises......Page 309
PART 4 Financing the Global Firm......Page 310
  Financial Globalization and Strategy......Page 311
  International Portfolio Theory and Diversification......Page 314
  The Demand for Foreign Securities: The Role of International Portfolio Investors......Page 320
  The Cost of Capital for MNEs Compared to Domestic Firms......Page 325
  The Riddle: Is the Cost of Capital Higher for MNEs?......Page 326
  Summary Points......Page 328
  MINI-CASE Novo Industri A/S (Novo)......Page 329
  Questions......Page 332
  Problems......Page 333
  Internet Exercises......Page 335
 Chapter 13 Raising Equity and Debt Globally......Page 337
  Designing a Strategy to Source Capital Globally......Page 338
  Optimal Financial Structure......Page 339
  Optimal Financial Structure and the MNE......Page 340
  Raising Equity Globally......Page 342
  Depositary Receipts......Page 346
  Private Placement......Page 352
  Foreign Equity Listing and Issuance......Page 353
  Raising Debt Globally......Page 356
  GLOBAL FINANCE IN PRACTICE Islamic Finance......Page 360
  Summary Points......Page 361
  MINI-CASE Petrobrás of Brazil and the Cost of Capital......Page 362
  Questions......Page 365
  Problems......Page 366
  Internet Exercises......Page 368
  Local Norms......Page 369
  Financing the Foreign Subsidiary......Page 370
 Chapter 14 Multinational Tax Management......Page 372
  Tax Principles......Page 373
  GLOBAL FINANCE IN PRACTICE Offshore Profits and Dividend Repatriation......Page 380
  Tax Management at Trident......Page 383
  Tax-Haven Subsidiaries and International Offshore Financial Centers......Page 384
  Summary Points......Page 386
  MINI-CASE Google, Taxes, and "Do No Evil"......Page 387
  Problems......Page 389
  Internet Exercises......Page 391
  The Trade Relationship......Page 392
  Benefits of the System......Page 395
  Key Documents......Page 397
  GLOBAL FINANCE IN PRACTICE Florence-The Birthplace of Trade Financing......Page 400
  Documentation in a Typical Trade Transaction......Page 402
  Government Programs to Help Finance Exports......Page 404
  Trade Financing Alternatives......Page 405
  GLOBAL FINANCE IN PRACTICE Factoring in Practice......Page 407
  Forfaiting: Medium- and Long-Term Financing......Page 408
  Summary Points......Page 410
  MINI-CASE Crosswell International and Brazil......Page 411
  Problems......Page 414
  Internet Exercises......Page 417
PART 5 Foreign Investment Decisions......Page 418
  Sustaining and Transferring Competitive Advantage......Page 419
  The OLI Paradigm and Internationalization......Page 422
  Deciding Where to Invest......Page 423
  Modes of Foreign Investment......Page 425
  Predicting Political Risk......Page 429
  Firm-Specific Political Risk: Governance Risk......Page 431
  Country-Specific Risk: Transfer Risk......Page 435
  Country-Specific Risk: Cultural and Institutional Risk......Page 438
  Global-Specific Risk......Page 440
  GLOBAL FINANCE IN PRACTICE Drugs, Public Policy, and the Death Penalty in 2011......Page 441
  Summary Points......Page 444
  MINI-CASE Corporate Competition from the Emerging Markets......Page 445
  Questions......Page 447
  Internet Exercises......Page 448
 Chapter 17 Multinational Capital Budgeting and Cross-Border Acquisitions......Page 449
  Complexities of Budgeting for a Foreign Project......Page 450
  Project versus Parent Valuation......Page 451
  Illustrative Case: Cemex Enters Indonesia......Page 452
  Project Financing......Page 465
  Cross-Border Mergers and Acquisitions......Page 467
  Summary Points......Page 472
  MINI-CASE Elan and Royalty Pharma......Page 473
  Questions......Page 477
  Problems......Page 478
  Internet Exercises......Page 481
Answers......Page 482
Glossary......Page 484
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